Welcome to Yield Report

Interest rate commentary for 28 Nov – 2 Dec 2016

Bond yields started the week calmly enough. It looked as if the stability of the previous week was carrying through to this one. Oil was flowing freely, the price per barrel had been dropping and, by the look of the OPEC meeting in Vienna, this was not going to change. Three days later, at the end of the meeting, OPEC production had been lowered and even the Russian had agreed to cut production. Bond yields moved dramatically as traders and investors started thinking about the effects of higher oil prices on future inflation. Australia government bond yields went with the pack.

However, attitudes of investors and traders can act a little bit like Melbourne weather. Hot one moment, cold the next. US non-farm payroll figures were published at the end of the week and what appeared to be a reason for higher yields turned into something different when analysts and economist had a look at the fine print.

Close Week
Chge
Week
High
Week
Low
Cash Rate%   1.50
90day Bank Bill%   1.77   0.01    1.77     1.76
Aust 3y Bond%*   1.99   0.06    2.02     1.87
Aust 10y Bond%*   2.83   0.11    2.86    2.63
Aust 20y Bond%*   3.47   0.14    3.47    3.24
US 2y Bond%   1.10  -0.01   1.15     1.08
US 10y Bond%   2.39   0.03   2.45     2.29
US 30y Bond%   3.06   0.05   3.11    2.95
iTraxx 109.0   0.00  111.3  108.0
$1AUD/US¢ 74.59   0.20  74.98   73.70
* Implied yields from Dec 2016 futures

Cash markets said enough was enough this week and decided to take breather from ratcheting up expectations of official rate changes. Whether it was because of, or despite a slew of domestic data releases, one cannot be sure. Charting types would say some pause was necessary to avoid “overshooting”.

Changes to term deposit rates were few in number and evenly split between rises and falls.

There has been quite a bit going on in the ASX-listed hybrids and ASX-listed notes sectors, with new issues, redemptions and some plain old pricing discrepancies as well.

The corporate bond sector bounced back from a state of inactivity and, even though there have been busier weeks than this one, transactions were varied.

We hope you enjoy reading this week’s YieldReport.

November 2016 monthly interest rate commentary

While there was a substantial amount of domestic data released during November, a lot of it had to compete with Trump-related speculation. Melbourne Institute’s Inflation Gauge which was positive for the third month in a row after a string of negative numbers earlier in the year. The RBA November meeting came next and rates were left unchanged  as most observers expected. Retail sales figures were good on a monthly basis but disappointing…Click here to read more

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